5. KBR, Inc (NYSE:KBR)
Average Price Target Upside as of August 15: 19.54%
Forward P/E as of August 15: 20
KBR, Inc. (NYSE:KBR) provides innovative science and technology solutions to governments and businesses worldwide. It operates through two main business segments including Government Solutions and Sustainable Technology Solutions. Under the Government Solutions segment, the company provides life cycle support for defense, intelligence, space, aviation, and other government programs. Its services include research, prototyping, systems engineering, and other related services. KBR, Inc. (NYSE:KBR) also operates a portfolio of proprietary process technologies for ammonia/syngas, chemicals, clean refining, and circular economy solutions.
To understand how KBR, Inc. (NYSE:KBR) provides utility in the aerospace and defense industry, it is important to look at some of its products. For instance, the company developed Iron Stallion, a system that helps track the movement of objects in space. The system helps national security agencies track and predict the movements of airborne objects.
The company posted a successful second quarter of 2024. Its revenue grew 6% year-over-year to reach $1.9 billion. Revenue growth was supported by improvements in both segments, however, the Sustainable Technologies Solutions segment grew 14% year-over-year as compared to the Government Solutions segment which grew only 3%. The Sustainable Technology segment also delivered strong adjusted EBITDA growth of 23%, mainly attributed to a favorable revenue mix and milestone licensing throughout the quarter.
One of the notable wins within the Government Solutions segment was an $8 million IAC MAC contract by the United States Air Force Life Cycle Management Center. In addition to this KBR, Inc. (NYSE:KBR) was also able to maintain a robust backlog of $16.2 billion at the quarter end.
KBR, Inc. (NYSE:KBR) is undervalued. It is trading at 20 times its forward earnings while the market average sits at 22. Moreover, its earnings are also expected to grow by 17% during the year to reach $0.81. 12 analysts have a strong buy rating on the stock, with their median price target of $77.5 presenting an upside of 19.54% from current levels.
Cove Street Capital Small Cap Value Fund stated the following regarding KBR, Inc. (NYSE:KBR) in its Q2 2024 investor letter:
“On the plus side, KBR, Inc. (NYSE:KBR) has been a strong performer so far YTD on the back of an investor day in the second quarter that highlighted the success of the last four-year plan (2020-2023) before laying out ambitious but credible targets for the next 4 years (2024- 2027). Since 2020, KBR has pivoted their commercial business away from high-risk EPC projects to a more differentiated IP-first consulting approach that now sees 20% EBIT margins and contributes 40% of their overall profitability. KBR has cleaned up their balance sheet by settling convertible notes and warrants and now sits at a healthy 2x net leverage. With the upcoming ramp of a $20B government services contract with the U.S. army, the company is well positioned to generate cash and return value to shareholders.”
